The Numbers Are In - And It Ain't Good

The latest job numbers are in and it ain't good. The unemployment rate rose back up from 8.1% to 8.2%. May destroyed the stock market gains. Federal employment numbers are down. Manufacturing is down. Job creation is on the verge of a total stall at only 69,000 created well below expectations. April and March job numbers decreased by 49,000.

Team Obama and President Barack Obama must be trying how to spin this as a positive. The campaign of presumptive Republican presidential nominee Mitt Romney is ramping up the verbage that the President's policies are to blame.

Well, this is a bad employment report — across the board. The Bureau of Labor Statistics reported that the economy created just 69,000 jobs in May -- the fewest in a year -- and the unemployment rate crept up to 8.2 percent.

A few takeaways:

Spring Slowdown. Once again, the jobs figures testify to a slowing of growth in the spring. But the gloomy data extend beyond the headline payroll jobs figure. The economy is growing and demand continues to rise. But that's not translating into more work or significantly higher wages. The average workweek for private sector sectors fell in May by .1 hours — i.e., six minutes. Manufacturing, which has been a pocket of strength, showed signs of weakness. The manufacturing workweek fell .3 hours to 40.5, and factory overtime fell sharply. Hourly earnings crept up a smidgen in May, and over the past year have risen just 1.7 percent.

Labor Force Rises. There's an odd wrinkle here. The unemployment rate is derived from the household survey, in which BLS calls people and asks them about their employment status. The rate is calculated by dividing the number of people estimated to be unemployed into the size of the labor force. When the labor force shrinks, the unemployment rate can fall even if the number of people who say they're working doesn't rise. But that's not what happened this month. In May, according to the BLS, the labor force actually grew by 635,000 — which means a lot of people who had been sitting on the sidelines jumped back in. The number of people employed, according to the Household survey, rose by 422,000 in the month.

The Conservative Recovery Continues. Europe isn't the only area where austerity and reduced government spending are impacting employment. Virtually every month for the past few years, the private sector has added jobs while the public sector (local, state and federal government) has cut jobs. That continued in May. The private sector added 82,000 payroll jobs in May while government cut 13,000 positions. Since February 2010, the private sector has added 4.27 million jobs, while the public sector has cut 1.028 million jobs since May 2010.

The Trend Isn't Your Friend. There was another way in which the May report reversed recent trends. Every month, when it reports the figures, BLS goes back and revises the figures it had reported for the prior two months. For much of this recovery, the trend has been for BLS to discover jobs that hadn't been originally reported and revise the prior months' totals higher. But not this month. In May, BLS revised the gains for the two previous months lower. March's figure, originally reported as a 120,000 gain, had been revised upward to 154,000 in April, was revised back down to 143,000. The April figure, originally reported as a gain of 115,000, was revised to a gain of only 77,000.

Labor Market Frustration Rising. Despite the general trend of more job openings and declining first-time unemployment claims, this report shows that the jobs market softened in May. In addition to reporting the headline unemployment rate, BLS publishes alternative measures of labor force frustration — e.g., rates that include workers who have given up, or who are working part-time but would prefer to work full-time. BLS compiles all such measures in the U-6. After falling for much of the past year, it rose in May — to 14.8 percent.

The weak May unemployment report presents President Barack Obama with a sobering reminder that his stewardship of a gradual recovery from the deepest recession since the Great Depression presents a tenuous argument for his re-election.

Anemic job growth and an uptick in joblessness to 8.2 percent also give new resonance to Republican presidential rival Mitt Romney's campaign and puts Obama on the defensive after a winter when the jobs trends were in his favor.

The jobs numbers, issued every four weeks from a spare, windowless room in the heart of the federal bureaucracy, are setting the battle lines for the presidential election.

As this year's dominant economic barometer, they are a baseline from which to gauge Obama's and Romney's political fortunes in an election that rides on the pace of a post-recession recovery.

Romney, responding to the first jobs numbers released since he clinched the GOP presidential nomination, called the figures "devastating news."

"It seems like we've been moving backward. We can do so much better in America," Romney said in a statement.

Stocks fell sharply Friday after the release of a dismal report on job creation in the United States. The Dow Jones industrial average dropped more than 200 points, erasing what was left of its gain for the year.

The Standard & Poor's 500 index and Nasdaq composite index both fell more than 1.5 percent in early trading.

A little more than an hour into trading, the Dow was down 215 points at 12,178, leaving it with a loss of 0.3 percent for the year. Earlier this year, the Dow was up more than 8 percent.

"The big worry now is that this economic slowdown is widening and accelerating," said Sam Stovall, chief equity strategist at S&P Capital IQ, a market research firm.

The weak jobs report sent traders stampeding into U.S. government bonds as a safe investment. Bond prices rose sharply, and the yield on the benchmark 10-year U.S. Treasury note fell to 1.46 percent, the lowest on record.

The Standard & Poor's 500 index was down 22 points at 1,287. The Nasdaq was off 52 at 2,775. Both of those indexes were still up for the year—about 2 percent for the S&P and 6 percent for the Nasdaq.

May was by some measures the worst month for the stock market in two years. That was primarily because investors were worried about a worsening debt crisis in Europe.

An increase in the unemployment rate in May and the lowest month of job growth in a year weakens President Barack Obama’s campaign to win re-election.

Payrolls expanded by 69,000 last month, less than the most pessimistic forecast in a Bloomberg News survey of private economists. The unemployment rate increase, to 8.2 percent, was the first for the jobless rate since last June.

Steven Rattner, who headed Obama’s automobile task force, said on Twitter that there is “absolutely nothing good to be said” about the employment report.

Republicans blamed Obama’s policies for the weak labor market. Mitt Romney, the party’s presidential candidate, called the jobs numbers “devastating news for American workers and American families.”

“It is now clear to everyone that President Obama’s policies have failed to achieve their goals and that the Obama economy is crushing America’s middle class,” Romney said in a statement.

The May jobless report follows April figures that also came in weaker than forecast and were revised down further today, to a 77,000 gain. Reports released yesterday showed the economy grew less than initially estimated during the first quarter and business activity in May expanded at the slowest pace in more than two years. The number of Americans applying for unemployment benefits rose to a one-month high in the week ended May 26.

The federal government has started to trim its workforce, ending several years of explosive and controversial growth that came at a time when private companies and state and local governments slashed jobs.

Federal employment has fallen for seven months in a row, the longest sustained drop in more than a decade. The decline is tiny: Just 11,600 fewer workers in April compared with a year earlier, excluding temporary Census workers, reports the Bureau of Labor Statistics. That's a fraction of the 2.2 million federal workforce.

Nevertheless, the reversal marks the end of a period of enormous employment growth that spanned the end of George W. Bush's presidency and the start of President Obama's term.

Federal employment grew 13% — 250,000 jobs — from the recession's start in December 2007 to a peak last September. During that time, private employment fell 5% and state and local governments cut staffs by 2%.

Political and financial pressures have stopped federal hiring growth, says John Palguta, vice president of the Partnership for Public Service, which promotes a high-quality federal workforce. "Budget challenges are becoming real," he says. He predicts the federal workforce will shrink through 2013 and maybe longer.

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